Cree Sheds Light on IPO Plans for Power & RF Business

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Cree, the LED lighting and semiconductor technologies company, is laying the groundwork to spin off one of its business units as a separate company, supported by an initial public stock offering.

Durham, NC-based Cree (NASDAQ: CREE) disclosed Monday that it has confidentially filed documents with securities regulators for an IPO for the company’s Power & Radio-Frequency Products (RF) unit—the business segment that makes components used in equipment for the power and telecom industries.

Cree has not yet said how much it expects to raise from the offering, nor has it determined how many shares it will sell, and at what price. Speaking Monday morning at the J.P. Morgan Technology, Media and Telecom Conference in Boston, Cree CEO Chuck Swoboda said that after the IPO, Cree would still be the majority shareholder in the Power & RF unit. But he explained that separating the businesses would allow Cree to focus completely on LED lighting, leaving the Power & RF unit to pursue growth in power and telecommunications applications. Swoboda added that Cree believes separating the businesses would “unlock value” for shareholders.

Many people might know Cree for its LED lightbulbs and fixtures, which illuminate commercial buildings, parking lots, and streets. The company maintains major operations in Racine, WI, from its 2011 acquisition of Ruud Lighting. In 2013, Cree entered the consumer market with an LED light bulb designed for home use. While Cree’s most visible products are in LED lighting, the company has a longer history making components that companies incorporate into their own electronics products. Founded in 1987 based on semiconductor research from North Carolina State University, Cree currently divides its operations into three business segments. In addition to its lighting products unit, it operates the Power & RF unit, as well as an LED Products unit, which makes LED chips for electronics.

The LED Products unit is Cree’s largest, generating $833.7 million in revenue in fiscal 2014. The company’s Lighting Products division generated $706.4 million in revenue. Meanwhile, Power & RF accounted for $107.5 million in revenue for the fiscal year.

Power & RF is Cree’s smallest business segment, but it is growing. In fiscal third-quarter results released last month, Power and RF accounted for $31 million in revenue, a 13 percent year-over-year increase. In telecom applications, Cree says its gallium nitride technologies improve on the efficiency, bandwidth, and frequency of products using gallium arsenide. In power applications, Swoboda said efficiencies of its silicon carbide technologies offer advantages in clean energy applications.

“We can build solar inverters that are a fraction of the size today, at higher efficiencies,” he said.

Cree already has a new executive in line for its Power & RF unit. In a securities filing, Cree said that it appointed telecom industry veteran Franco Plastina as interim executive vice president for Power and RF, effective June 8. Plastina is a former Nortel Networks executive who later became CEO of Tekelec, a Morrisville, NC-based company that provided hardware and software to the telecom industry and was acquired by Oracle (NYSE: ORCL) in 2013.

Cree said in the filing that it expects Plastina to become CEO of the Cree Power & RF division upon completion of the IPO.

Frank Vinluan is editor of Xconomy Raleigh-Durham, based in Research Triangle Park. You can reach him at fvinluan [at] xconomy.com Follow @frankvinluan